Malaysian E Commerce Journal (MECJ) 4(1) (2020) 20-23

Malaysian E Commerce Journal (MECJ)

DOI: http://doi.org/10.26480/mecj.01.2020.20.23

ISSN: 2616-5155 (Online)

CODEN: MECJBU

REVIEW ARTICLE
RELATIONSHIP OF TOTAL QUALITY MANAGEMENT TO QUALITY PRODUCT AND
CORPORATE PERFORMANCE
Ayi Tejaningrum

Management, STIE EKUITAS, Bandung Indonesia

*Corresponding Author Email: ayi.tejaningrum@ekuitas.ac.id

This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction
in any medium, provided the original work is properly cited.

ARTICLE DETAILS ABSTRACT

Article History: Background: Small and medium businesses (SMEs) have major problems with regard to product quality so
that it affects the low competitive ability. Some indications include high product variability, low process
Received 14 February 2020 capability and low customer satisfaction. The purpose of this study is to prove whether the implementation
Accepted 18 March 2020
Available online 20 April 2020
of Total Quality Management (TQM) in SMEs influences product quality and company performance? The
research method is descriptive qualitative with a survey approach, samples taken using the simple random
sampling method of 60 SMEs in two districts namely Cianjur and Bandung. The questionnaire was used as a
data collection tool. Based on the results of the study showed that the quality of products perceived by
consumers is influenced by the implementation of TQM, the better SMEs implement TQM, the better the
product quality. The data further proves that organizational performance as assessed by ROA (Return of
Investment) is influenced by product quality, so that if the company wants to increase profits then improve
product quality. This research is limited to processing industry SMEs not to the service sector. Some of the
limitations of SMEs that have an impact on low quality are low access to technology, access to raw material
sources which results in high product variability.
KEYWORDS
Total Quality Management, Dimension of Quality, Corporate Performance.

1. INTRODUCTION products include inconsistency or high variation, low features, poor

The problem of product quality is not only a problem in large industries
but also occurs in SMEs, especially those engaged in the processing
industry. The business world is making significant progress in the 21st
century, mainly related to the company's competitive ability which is
increasingly believed to be based on quality products. The evolution of
quality meaning began in the 1920s with the concept of inspection, in this
decade all companies trying to sell products have no mistakes. In this 21st
century, the development of product quality studies is very rapid which is
characterized by the concepts of Six Sigma, TQM, MBNQA, QFD etc. One
study is related to total quality management (TQM), where all components
in the organization play an active role in the process to ensure that the
product has good quality.
Small and medium businesses (SMEs) in Indonesia are the backbone of the
economy because they are able to absorb 97% of the workforce and
contribute to GDP by 60%, with growth of 5%. On the other hand, SMEs
have problems that are closely related to product quality, access to raw
materials, access to marketing and also access to technology and capital.
These conditions resulted in the development of SMEs that are far below
the development of medium and large businesses. Based on the results of
the author's analysis, the main problem of SMEs is on product quality,
where almost 72% of consumers agree that the quality of SME products is
not good (Tejaningrum 2016). Some characteristics of the quality of SME
reliability and durability, dominant owner in accessing product quality
and all aspects of the company so that the role of the system is very low.
TQM (Total Quality Management) is a comprehensive quality control
method, involving all components of the organization and the scientific
approach becomes very important. TQM itself has been studied in various
countries, especially its implementation in SMEs, several studies show:
study in Korea, Tunisian, Qatar, in Indians, in Iranian by describing several
key criteria in the process of implementing TQM (Yang, 2005; Lakhal et al.,
2006; Ismail, 2009; Khanna et al., 2011; Valmohammadi, 2011). This study
aims to analyze the implementation of TQM in Indonesia by connecting
with consumer perceptions and company performance.
While on the other hand the role of product and service quality is
significantly related to the company's progress, this was stated that quality
will improve: company reputation, product reliability, will have the ability
to compete globally (Juran, 1998; Heizer and Render, 2012). Quality is one
of the measurement tools for performance besides productivity and
efficiency (AL Darrab, 2000). Quality will become a market mover and
increase productivity, besides that quality will increase consumer loyalty
(Tejaningrum, 2016; Ross, 1994).
2. LITERATURE REVIEW
2.1 Total Quality Management Concept

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Cite the Article: Ayi Tejaningrum (2020). Relationship Of Total Quality Management To Quality Product And Corporate Performance .
Malaysian E Commerce Journal, 4(1): 20-23.
 Malaysian E Commerce Journal (MECJ) 4(1) (2020) 20-23
TQM first appeared as a result of the many products that were still rejected
by consumers even though the company had carried out quality control.
TQM is directed into the process to ensure that there will be no errors in
the process from input to the final product. TQM guarantees that quality is
the responsibility of all components of the organization from leadership to
operations. The TQM dimension consists ofPrayogo and Dermott:
leadership, strategic planning, customer focus, information and analysis,
people management, and process management. While Goest: Focus on
Customers, Obsession with Quality, Scientific Approach, Long-term
Commitment, Teamwork, Continuous System Improvement, Education
and Training, Controlled Freedom, Unity of Purpose, Employee
Engagement and Empowerment.
The following is an explanation of each dimension: (1) Customer focus is
oriented to the organization's ability to make customers the main basis in
establishing quality. (2) Quality obsession is related to the desire of the
leadership which is inscribed into the implementation of how the quality
of new goods and services becomes a target and dream to be achieved. (3)
The scientific approach with regard to the process of solving the problem
based on the quality of data and numbers which is then processed with
scientific rules to identify the suitability to find causes and determine
solutions, in their applications often use statical quality control with 7
tools. (4) Long-term commitment means that quality is not a project
without time limit, but it is related to the long term or there is no time limit.
(5) Teamwork is related to the concept that quality is the overall
responsibility of the members in the organization. (6) Continuous
improvement, this concept provides an understanding that quality is
dynamic, changes from time to time, so quality improvement must be
carried out continuously. (7) Education and training: to develop quality
that is constantly changing, it is necessary to increase the overall
competence of the members of the organization team, therefore education
and training is absolutely necessary. (8) Controlled freedom: each team
member is given full authority on the limits of his control to make
decisions in quality improvement. (9) Unity of Purpose: All members of
the organization from top management to the lowest level have the same
goals in achieving quality products. (10) Employee involvement and
empowerment: in the implementation of TQM the term QCC, is known as
a form of employee participation in quality improvement.
2.2 Quality Concept
Conceptually the quality of goods and services is difficult to interpret, but
implementation in the field can easily identify the quality of goods and
services. If we get services from a hospital, of course we hope to get a neat
and clean hospital condition, a simple procedure, friendly and responsive
medical personnel, an affordable price and of course a healing treatment.
Meanwhile, when we deal with goods for example shoe products, of course
we hope, good models, durability, no defects, friendly servants, varied
products, comfortable to use. Some concepts related to quality, introduced
by Juran, known as Trylogi Juran, are: planning, controlling and improving
quality. Crosby with 4 quality concepts: conformity to specifications,
quality is prevention, zero defects and quality of the relationship with the
price of compatibility, while Deming emphasizes that quality is the
responsibility of all components of the organization.
From these concepts Tejaningrum states that quality is more emphasized
into the company's efforts to meet consumer expectations, is dynamic
meaning it will change from time to time, also the quality of the
relationship with the extent to which we exceed that of competitors, with
the ultimate goal to expect consumers make a repeat purchase. To
measure product quality there are 8 dimensions: performance, features,
reliability, conformance to specifications, durability, serviceability,
aesthetics and perceived of quality (Garvin, 1998). In the context of this
research, SMEs studied are engaged in the processing industry that works
in the creative industry sector, such as: food, clothing, crafts, printing.
2.3 Corporate Performance
In measuring the performance of companies using a financial-based
measure of the value of the profits the company. This concept is in
accordance with what was stated by Kaplan (1996) regarding the
Cite the Article: Ayi Tejaningrum (2020). Relationship Of Total Quality Management To Quality Product And Corporate Performance .
Malaysian E Commerce Journal, 4(1): 20-23.
performance based on the balanced scorecard by providing financial
indications as one measure of business performance, in addition to
customer satisfaction, internal business and growth learning. Financial
performance measures at the beginning of the 20th century are more
focused into the accounting management system, where the data used are
financial statements in the form of a balance sheet and income statement,
the usual measurement units are: Profit margin (PM) Total assets turn
over, Return on Investment ( ROI), Return on assets (ROA), Market value
added (MVA), Economic Value added (EVA) (Vanani: 2009).
General Electric (GE) is the first company to allow measurement of
organizational performance from non-financial aspects by including
productivity, job satisfaction and labor turnover. Each performance
system has weaknesses and strengths. SMEs is the object of this research,
where financial and non-financial administration is not recorded well.
Therefore, to measure performance, it is assessed from financial aspects
that are not based on records but based on estimates of the value of profits
and the value of assets owned. Thus the measurement is to use Return on
Assets.
𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛
RoA =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
3. METHODOLOGY
3.1 Research Method and Hypotesis
The research objective is to obtain a comprehensive condition regarding
the implementation of TQM in SMEs, consumer perceptions of product
quality and company performance. Next analyze whether there is a
relationship between the implementation of TQM with product quality
and company performance. In connection with this, the descriptive
qualitative research method, which is a method to describe the condition
of the object at and connect between one variable with another variable to
further draw conclusions. The research instrument used a questionnaire
with data collection techniques through interviews and field observations.
The research model and hypothesis is:
Hypothesis 1:
H0: TQM affects the quality of the product
H1: TQM has no effect on product quality.
Hypothesis 2:
Ho: Product quality affects company performance
H1: Product quality has no effect on company performance
Figure 1: Research Model
3.2 Population and Sample
The study was conducted in 2 districts namely Cianjur and Bandung. These
two districts were taken because they have relatively many SMEs engaged
in the processing industry. Products in the form of tofu, candied fruit, car
spare parts, crafts, garment, bread, dolls, shoes, sandals, socks, printing,
 Malaysian E Commerce Journal (MECJ) 4(1) (2020) 20-23
snacks, sauces, drinks. Each district we take 30 with the requirements:
have a minimum of 10 employees, a minimum turnover of Rp 500 million
/ year, in accordance with the provisions of SMEs According to Law No 20
of 2008 concerning SMEs. The sampling method is simple random
sampling where each UKM has the same opportunity to be sampled but
must meet established criteria.
4. RESULT AND DISCUSSION
4.1 Implementation of TQM
As stated previously, the analysis of Total Quality Management is broken
down into 10 dimensions, namely (1) customer focus, (2) obsession with
quality, (3) scientific approach, (4) long-term commitment, (5) teamwork
(6) system improvement On an ongoing basis (7) Education and training
(8) Controlled freedom (9) Unity of purpose (10) Employee Engagement
and Empowerment. Following are the average values given by 90 SMEs in
each dimension. Following is the average value of TQM implementation
using a Likert scale from one to five.
The main weaknesses of the 10 dimensions of TQM are: customer focus,
Quality obsession, scientific approach, long-term commitment,
Continuous System Improvement, training education. While the
dimensions of TQM with good values are: Customer Focus, Teamwork,
Controlled Freedom, Unity of Purpose, Employee Engagement and
Empowerment.
Figure 1: Average Value of TQM
4.2 Performance of Quality Product
For quality performance assessment, identified with 8 dimensions of
product quality, namely: performance, features, reliability, conformance
to specifications, durability, serviceability, aesthetics and perceived of
quality. The magnitude of the average value of each quality dimension can
be seen in Figure 2.
Figure 2: Average of value Quality Product
Cite the Article: Ayi Tejaningrum (2020). Relationship Of Total Quality Management To Quality Product And Corporate Performance .
Malaysian E Commerce Journal, 4(1): 20-23.
Based on Figure 2 it can be seen that the low dimensions of the quality of
SMEs products are perceived features, durability, aesthetics and quality.
Thus it can be concluded that the products produced by SMEs are
perceived as low quality products, have an aesthetic or eye-catching
appearance, are of low durability and tend to have disabilities. While
consumers perceive that SMEs products tend to have the ability to meet
good specifications, good service and performance.
4.3 Company Performance
Performance measurement refers to the amount of non-Asset Returns
(ROA), which shows the ability of assets to generate corporate profits. The
highest ROA value is 43 and the lowest ROA is 11, with an average of 27.
ROA 43 shows that every one rupiah of assets is able to generate a profit
of 0.43 far exceeding bank interest rates. The highest value is only owned
by one company and the lowest value is 11, which means that the company
is able to make a profit of only Rp. 0.11 from every Rp. 1 of the company's
assets. The average ROA value of the sample SMEs is 0.27, generally still
above the bank interest rate of 0.14.
Figure 3: Value of Return On Invesment
4.4 Relationship Implementation of TQM to Product Quality
Performance
Seen in Table 1 the value of R Square is 0.609, this shows that the
contribution of the influence of X1 (TQM) to Y1 (Product Quality) is 60.9%
while the remaining 12.8% is influenced by other variables not included
in the study.
Tabel 1: Model Summary Output Model
Model Summary
Model R R Square Adjusted R Std. Error of the
Square Estimate
1 ,954a ,609 ,891 2,17549
a. Predictors: (Constant), X10, X9, X8, X7, X6, X5, X4, X3, X2, X1
Thus, it can be concluded that the implementation of TQM has a significant
effect on the quality of products perceived by consumers. The relationship
between the two variables is positive which indicates, the better the
implementation of TQM in SMEs, the better the quality of the product, and
vice versa if the implementation of low TQM low quality product.
4.2 Relationship Implementation of TQM and Quality Product to
Corporate Performance
Table 2 Model Summary Output Model 1 has a R Square value of 0.780, this
shows that the contribution of X1 (TQM) and X2 (Quality Product) to Y1
(Corporate Performance) is 87.2% while the remaining 12.8% is
influenced by other variables not included in the study.
 Malaysian E Commerce Journal (MECJ) 4(1) (2020) 20-23
Tabel 2: Model Summary Output Model 2
Model Summary
Model R R Square Adjusted R Std. Error of the
Square Estimate
1 ,883a ,780 ,729 4,73726
a. Predictors: (Constant), Y1, X9, X2, X1, X10, X7, X6, X5, X3, X4, X8
The amount of company profits is determined by product quality by 78%,
while the remaining 22% is another variable, thus the higher the quality
of SME products perceived by consumers, the higher the company's ability
to generate profits. Therefore, company profits will decrease when the
ability of SMEs to manage quality decreases.
5. CONCLUSION
Based on the results of research on 60 SMEs on the implementation of
TQM, product quality and company performance, concludes the following
sections: first the weaknesses of TQM implementation are in the
dimensions of quality obesity, consumer focus, scientific approach, long-
term commitment, Continuous System Improvement, and training
education. Based on the results of the study that the implementation of
TQM has a positive effect on product quality and company performance.
Therefore, SMEs must: make consumers a barometer of product quality,
make continuous quality improvements, improve education and training
for employees to improve skills and record data and information
regarding product compatibility so that the causative factors can be
identified to get solutions.
The second regarding the weaknesses in the quality dimension is on: the
aesthetics or appearance of the product as a whole, additional functions of
the product, durability and improvement of the company's image. In
response to this, the SMEs must ensure that the products sold to
consumers are products that avoid compliance. Future improvements
relate to the ability of SMEs to be able to access quality sources of raw
materials, and technologies that help to improve product quality,
especially those related to durability and aesthetics.
Cite the Article: Ayi Tejaningrum (2020). Relationship Of Total Quality Management To Quality Product And Corporate Performance .
Malaysian E Commerce Journal, 4(1): 20-23.
ACKNOWLEDGEMENT
I would like to thank STIE EKUITAS and the Directorate of Higher
Education (Dikti) of the Ministry of Education and Culture of the Republic
of Indonesia for supporting research activities to seminar activities which
took place in Singapore in October 2019.
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